Section 7432 - Defaults, Transfers and Assumptions(a) In the event a borrower should default on any of its debts to a lender or creditor whose loan is secured in any manner by the subject property and the lender or secured creditor should proceed to force a sale of the subject property after a foreclosure procedure, or in the event a judgment has been taken against the property owner and the judgment creditor should proceed to force a sale of the subject property in satisfaction of its claim, the Department by this fact approves the sale. In the case of an assisted owner-occupied unit, the deferred payment loan shall be repaid according to law or the loan may be assumed for the remaining term of the loan by an eligible purchaser, with the approval of the Department; at the end of the loan term, such loan shall be repaid in full including all accrued interest. In the case of elderly owner-occupants, deferred payment loans shall be repaid in full, including all accrued interest, upon sale or transfer of the property. If the property includes assisted rental units, the purchaser may take it subject to the restrictions of the loan agreement between the local entity and borrower, subject to the approval of the Department.(b) If an assisted owner-occupied unit is transferred, the deferred payment loan shall either be repaid or may be assumed for the remaining term of the loan by a person who meets eligibility requirements of the program, with the approval of the Department; at the end of the loan term, such loan shall be repaid in full, including all accrued interest. In the case of elderly owner-occupants, deferred payment loans shall be repaid in full including all accrued interest, upon sale or transfer of the property. If a property with assisted rental units is transferred, the transferee may assume the loan. In all cases, the transferee of a property with assisted rental units shall take the property subject to the restrictions of the loan agreement between the local entity and the original borrower, subject to the approval of the Department.(c) Local entities shall process requests or applications for loan assumptions in accordance with these regulations, using documents provided by the Department, during the term of the Standard Agreement between the local entity and the Department. This obligation shall continue until all loans under this program have been paid in full.(d) When a loan is repaid by an owner-occupant borrower, the loan agreement with the borrower shall be terminated and the Deed of Trust shall be reconveyed.(e) A reserve fund in the amount of 3 percent of the maximum amount of total program assets, including the total outstanding loan balance plus the balance of the Housing Rehabilitation Loan Fund, shall be maintained by the Department. The reserve fund balance shall be calculated annually. The purpose of this fund is to permit the Department to utilize such funds, when required in the case of a defaulted loan to protect the security interests of the Department. In addition, such funds may be applied to the State's administrative and legal expenses incurred in connection with such defaults. The Loan Committee may change the size of and establish the terms or use of the reserve fund by a majority vote.(f) In the event a borrower or successor-in-interest defaults on any material provision of the loan agreement or these regulations, the local entity shall promptly demand rectification of the default. If substantial progress is not made in rectification within 30 days from such notice, at the discretion of the Department the local entity shall declare the note evidencing the loan to be due and payable.(g) In the event a local entity defaults on any material provision of the Standard Agreement with the Department or these regulations, the Department may demand rectification of the default. If substantial progress is not made in rectification within 60 days from such notice, the Department may seek such remedies as are available to it under the terms of the Standard Agreement.Cal. Code Regs. Tit. 25, § 7432
1. Amendment filed 10-2-81; effective thirtieth day thereafter (Register 81, No. 40).
2. Amendment filed 6-3-85; effective thirtieth day thereafter (Register 85, No. 23).
3. Amendment of subsection (e) filed 3-17-86; effective thirtieth day thereafter (Register 87, No. 12). Note: Authority cited: Section 50662, Health and Safety Code. Reference: Sections 50660-50668, Health and Safety Code.
1. Amendment filed 10-2-81; effective thirtieth day thereafter (Register 81, No. 40).
2. Amendment filed 6-3-85; effective thirtieth day thereafter (Register 85, No. 23).
3. Amendment of subsection (e) filed 3-17-86; effective thirtieth day thereafter (Register 87, No. 12).